The risks of overpricing in a nutshell....
Pricing a home more than 3% over the market value could result in the following:
Buyers may choose not to view the home at all because they perceive there are better values in other lower priced "comparable" properties.
By pricing in a higher price range you eliminate potential buyers that otherwise might be able to afford the home if it were priced closer to the market value.
If a buyer is willing to pay more than market value (and this is not the norm) they may not be able to get financing because the property may not appraise.
While all of this is going on the home is "not on the market" and you loose valuable time. A home that stays on the market too long because it is priced too high gets stigmatized. This is why it's critical to price it right from the beginning and set the correct expectations of the seller.